What Is Cyber Insurance?
Cyber insurance policies allow businesses to gain recovery costs from cybersecurity attacks, breaches, and other similar events. These financial products are also known as “cyber liability insurance” or “cyber risk insurance.” Typically, the most critical aspect of cyber insurance is network security coverage. This type of coverage responds to network security failure incidents such as malware, data breaches, ransomware attacks, and email compromises. However, the policy also responds to liability claims and ancillary expenses of a break or attack. In most cases, the policy provides access to a panel of top-tier data breach coaches and IT service providers.
Who Needs Cyber Insurance?
We encourage businesses of all sizes and industries to consider the value of cyber insurance, especially those with digital information. Does your business store client data on any computer system on or offline, such as names, credit card information, addresses, or social security numbers? If so, a regulatory obligation requires your data to be secure, resulting in a higher price in the event of a cyberattack.
Many people are often surprised to learn the actual costs associated with a breach. Cyberattacks cost small businesses upwards of $2.235 million, and attacks only become more severe and sophisticated each year.
Does it sound like your business may need coverage? Tell us more about your organization and the IT pain points you often struggle with, and one of our IT experts will help get you back on the right track.
Additionally, if your small business revenue stream has any contact with European consumers or businesses, then the General Data Protection Regulation (GDPR) most likely applies to you. Many US businesses have already implemented measures to be GDPR compliant, but that doesn’t necessarily mean your insurance has followed suit.
Why Do You Need It?
The purpose of traditional business insurance policies is not to cover the risks associated with cyberattacks and breaches. Therefore, many insurance experts argue that cyber insurance policies are still in their infancy. Much work must standardize coverage to ensure that insurance carriers support modern business needs. Education is also crucial for small businesses to understand the severity and implications of cyberattacks. The sad thing to recognize is many companies lack a quality security strategy, making them highly vulnerable.
With that said, there’s no doubt that cyber insurance will continue to multiply, with offers expanding with customization. Also, cyber insurance policies are moving towards more industry-specific solutions and becoming much less generalized.
What Does Cyber Insurance Cover?
Cyber insurance is as flexible as the companies it protects, meaning it’s far from standardized. However, there are some IT challenges that cyber insurance typically covers, such as:
- Data loss, recovery, and recreation
- Loss of transferred funds
- Computer fraud
- Cyber extortion
- Loss of revenue due to a cyber breach
Important Note: Errors and Omissions Insurance isn’t cyber insurance and does not serve as a substitute for proper insurance coverage. If hackers steal personal information, such as a driver’s license number, social security, addresses, or bank information, a cyber insurance policy covers:
- Notification Costs
- Credit Monitoring
- Civil Damage
- Computer Forensics
- Reputational Damage
Cyber insurance providers are also responsible for defending policyholders from liability lawsuits or administrative actions. For example, cyber insurance offers privacy liability coverage, essential for most companies, especially those that store customer and employee information on their business networks. Breaches that expose client information surrender your business to liability lawsuits against the client. Also, cyber insurance provides coverage as a safety net if you violate any privacy laws. Most policies also offer resources that help policyholders design cost-effective security and data encryption protocols.
What Isn’t Covered?
Like most coverages, there are specific exclusions that cyber insurance doesn’t typically cover. The policy won’t respond if you’re sued for any vulnerabilities in your systems before breaches occur. Cyber insurance policies usually don’t reimburse for future profits lost due to data breaches or cyberattacks. If you’re fearful of losses due to theft of your intellectual property, you’ll need to search for a specifically tailored intellectual property insurance policy. Additionally, third parties do not offer coverage if violations are against a policy holder’s patent.
If an agent of foreign power causes the breach, insurance companies may deny coverage under the acts of war exclusion. Alongside that, the cost to improve your technology systems and security after an attack is typically not included in most policies. Most traditional insurance policies, particularly general liability insurance (CGL), weren’t designed with cyber breaches and risks in mind. The gray area means that CGL policies typically won’t cover cyber liability; if they do, it’s very minimal. It’s important to mention that social engineering attacks can be considered a particular case. These attacks rely on psychological manipulation to gain access to sensitive information or funds.
Does Cyber Insurance Have a Deductible?
Like most coverages, cyber insurance does have a deductible, and you select the deductible amount when securing coverage. A deductible is a fixed amount of funds you’ll pay before coverage kicks in and starts paying, and it’s applied each time cyber insurance covers a loss. If you aim for a higher deductible, you’ll secure lower premiums.
What is the Cost of Cyber Insurance?
Regarding the cost of cyber insurance, it’s best to shop for the type of insurance instead of the exact price. Your business’s sophistication, coverage limit, and ability to avoid incidents are the most significant factors in determining premium costs, along with revenue and the number of unique PII or PHI records stored on the insured systems.
Still in Doubt?
As entrepreneurs, it’s your responsibility to stay up to date on the latest and greatest technology trends. Remember, everything is becoming more technologically-focused in modern times like these. That’s why it’s essential to have IT professionals in your corner who offer guidance and insight.
You have a massive pool of IT professionals out there to choose from. But, finding people with the perfect blend of certifications, skills, integrity, and availability is far from easy. You may spend endless hours trying to weed through candidates, and trial-and-error can become quite an expensive hiring strategy.
At Parried, we understand that while IT is undoubtedly an integral part of your business, maintaining its integrity should be in the background while you tend to your company’s primary needs. We are a trusted technology growth partner that seeks win-win relationships with our clients. If you still have lingering questions or concerns about cyber insurance or outsourcing your IT, learn more about our managed IT services and how we can help grow your business.